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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76386  
Subject: Bad Investment Advice from Dave Ramsey Date: 9/29/2013 6:05 AM
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Money magazine has a long article criticizing radio talk show host Dave Ramsey's advice that you should buy a high commission, loaded mutual fund from one of his 'endorsed local providers'.

http://money.cnn.com/2013/10/01/pf/dave-ramsey.moneymag/inde...

intercst
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Author: billjam Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73365 of 76386
Subject: Re: Bad Investment Advice from Dave Ramsey Date: 9/29/2013 6:51 AM
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I read this article when it came out. Found it most informative. Always wonder about guys like Ramsey and this article answered my questions.

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Author: aj485 Big gold star, 5000 posts Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73366 of 76386
Subject: Re: Bad Investment Advice from Dave Ramsey Date: 9/29/2013 12:43 PM
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Contrary to the persona he tries to portray, Dave Ramsey seems to have focused his business on enriching himself, just like many other people who provide personal finance advice.

While Dave Ramsey has inspired many people to get out of debt, his method of focusing their snowball on debts from smallest to largest, rather then from highest interest rate to lowest interest, usually turns out to be more expensive. He tries to justify this by saying Paying off debt is not always about math. It’s about motivation. Personal finance is 20% head knowledge and 80% behavior. When you start knocking off the easier debts, you will see results and you will stay motivated to dump your debt. but he provides no studies or data to back up his assertions. However, Dave Ramsey is enriched by selling his books, his TV show and his seminars on how to get out of debt.

His mortgage advice - to refinance using his 'endorsed provider' rather than shopping around, may also be more expensive, but it's hard to know this for sure, since the endorsed provider does not appear to post rates on the web for comparison. Just like his investing endorsed providers, I'm sure that the endorsed provider pays lead generation fees to Dave Ramsey, though.

And he has lots of other providers he endorses - for insurance, security, etc. Again, those lead generation fees will enrich Dave Ramsey.

He's apparently very good enriching himself - he's supposedly worth >$50 million, and built a new house that, with the land, is valued at nearly $5 million (although he says he paid cash).

AJ

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73367 of 76386
Subject: Re: Bad Investment Advice from Dave Ramsey Date: 9/29/2013 1:34 PM
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Like it or not, the reality is that very few who offer financial advice do so for reasons of altruism. Nearly all expect to be compensated one way or another. Every investor needs to understand how your adviser makes his money.

Without compensation, most would change careers very soon.

One wonders if load funds or commissioned insurance sales were not allowed, would there be enough financial advisers out there to help all those who need help. If hidden fees were not allowed, would individuals willingly pay reasonable fees?

Or must fees be hidden to pay for "free" advice?

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Author: joelxwil Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73368 of 76386
Subject: Re: Bad Investment Advice from Dave Ramsey Date: 9/29/2013 1:41 PM
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Do we really need financial advisers? Mostly it is simple math. Also a good charting and comparison program can help you find the winning mutual funds, and give you a fairly clear indication when it is time to sell or switch funds.

Of course, some people have a mental block when it comes time to take charge of their financial matters. I have watched otherwise intelligent people just draw a blank when it comes to their finances. I fear they would be putty in the hands of a bad financial adviser.

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73369 of 76386
Subject: Re: Bad Investment Advice from Dave Ramsey Date: 9/29/2013 2:12 PM
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It's funny -- before I clicked the link I said to myself, "Ramsey's savings & debt advice is good, his investment advice isn't." The headline of the story was almost word for word what I said.

While Dave Ramsey has inspired many people to get out of debt, his method of focusing their snowball on debts from smallest to largest, rather then from highest interest rate to lowest interest, usually turns out to be more expensive.
No, his advice is spot on FOR THE PEOPLE WHO ARE IN THAT POSITION. People like us aren't in that position. We're looking for the most efficient way to make/save money. They are needing help getting out of cement galoshes.

If they could think logically about it, they wouldn't be in trouble in the first place. The solution they need is something --anything-- to help them breask out of the debt cycle. For them, seeing the big stacks of monthly bills become small stacks is *exactly* what they need to motivate themselves.

<... you will see results and you will stay motivated to dump your debt. but he provides no studies or data to back up his assertions.
How is this even questionable? It's the basis for every motivational support group. AA, Weightwatchers, 12-step drug rehab, etc.


His investment advice is crap, though. And his ELP/kickback program is unethical, IMHO. He's taking advantage of the people who have self-identified as being financially incompetent, when they are vulnerable.

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Author: buzman Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73370 of 76386
Subject: Re: Bad Investment Advice from Dave Ramsey Date: 9/29/2013 2:34 PM
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Save like Dave, just don't invest like (or with) him...good advice.

Dave may have helped a lot of people get out of debt but they jumped from the frying pan to the fire.

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Author: PucksFool Big gold star, 5000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73371 of 76386
Subject: Re: Bad Investment Advice from Dave Ramsey Date: 9/29/2013 4:14 PM
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Ramsey isn't the only slimy scale of underbelly of personal finance. Helaine Olen, in her book Pound Foolish, looked at how the personal finance industry has the fiduciary interest of the personal finance industry at heart. It's worth a read.

PF

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Author: JLC Big gold star, 5000 posts Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73372 of 76386
Subject: Re: Bad Investment Advice from Dave Ramsey Date: 9/29/2013 4:30 PM
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It's funny...

I find it funny/ironic the comments made about Ramsey can easily be made about The Motley Fool.

People need to take Ramsey for what he is worth, a motivational/get out of debt mentor. TMF, I only come here for the boards.

JLC

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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73373 of 76386
Subject: Re: Bad Investment Advice from Dave Ramsey Date: 9/29/2013 10:34 PM
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TMF, I only come here for the boards.

One has to believe the TMF premium services are reasonably effective at researching and recommending stocks. If not, they will go the way of Foolish Eight.

I recall that Value Line set up a mutual fund based on their fundamental rating system. But performance was mediocre. It certainly did not meet expectations consistent with the Value Line rating system.

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Author: intercst Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Feste Award Nominee! Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73374 of 76386
Subject: Re: Bad Investment Advice from Dave Ramsey Date: 9/29/2013 11:17 PM
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Rayvt writes,

His {Dave Ramsey] investment advice is crap, though. And his ELP/kickback program is unethical, IMHO. He's taking advantage of the people who have self-identified as being financially incompetent, when they are vulnerable.

</snip>


If you look at the Dave Ramsey Shaft Detector (see link below), someone paying a 5.00% load plus the average mutual fund's expense ratio and trading costs of 2.09% would lose about half the value of his retirement portfolio to Dave Ramsey and his confederates over 40 years.

http://retireearlyhomepage.com/daveramsey.html

That means more elderly retirees on Food Stamps and in Gov't subsidized housing. Every taxpayer has a stake in exposing this kind of "legalized" retirement fraud.

intercst

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Author: DolonAltekar Three stars, 500 posts SC1 Red Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73375 of 76386
Subject: Re: Bad Investment Advice from Dave Ramsey Date: 9/30/2013 1:06 AM
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I think that fraud is a bit strong here. Dave Ramsey gives people good, if basic advice about achieving financial freedom - get out of debt, spend less than you make, save for emergencies, invest.

In none of these things does he give sophisticated advice. But millions of people are better off for listening to him, I believe.

We are not his target audience. We are way out to the left on the bell curve when it comes to personal finance. I work at Google, and there are lots of people I personally know there that have no idea what to do with their stock or option grants, and investing for them is buying CDs. They are either afraid of the stock market or indifferent to it.

For most of the Dave Ramsey audience, the fact that they try to get out of debt, and save a little for emergencies, and maybe invest a little for their future is huge.

I agree that his advice could be much better. The 12% number he throws around is too high and load funds are a scourge, but to a person who never would consider investing at all, paying someone to handhold them and put SOMETHING away is better than nothing, or negative, which is where they'd probably be without help.

Would I rather that he engage fee only planners who would help people put their meagre savings into a set of Vanguard index funds? Yes, I would, but the alternative, I believe would be that these same people wouldn't invest at all, which would be worse.

Those that are smart enough and interested enough to see the advice for what it is will do it themselves. Others will arguably be better off talking to their "guy" and at least saving and investing something.

D.

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Author: DolonAltekar Three stars, 500 posts SC1 Red Motley Fool One Everlasting Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73376 of 76386
Subject: Re: Bad Investment Advice from Dave Ramsey Date: 9/30/2013 1:20 AM
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Oh yeah, at least he keeps people out of Annuities and Whole Life insurance, which is what passes for investments in some circles. Now that's fraud...

D.

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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 73377 of 76386
Subject: Re: Bad Investment Advice from Dave Ramsey Date: 9/30/2013 9:38 AM
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If you look at the Dave Ramsey Shaft Detector (see link below), someone paying a 5.00% load plus the average mutual fund's expense ratio and trading costs of 2.09% would lose about half the value of his retirement portfolio to Dave Ramsey and his confederates over 40 years.

And they'd *still* be ahead of an IUL. With more volatility granted, but so what? Volatility cancels out over 40 years.
At least in a mutual fund you get the dividends.

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